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Case Title:Commissioner of Internal Revenue V. San Roque Power G.R. No.:187487 Date: 08 October 2013 Ponente:Carpio, J. Facts

This case involves motions for reconsideration filed by San Roque Power Corporation and the Commissioner of Internal Revenue regarding tax refund claims. San Roque argues that the Supreme Court's prior ruling on mandatory filing periods should only apply prospectively due to an alleged administrative practice by the Bureau of Internal Revenue. The Commissioner asserts a tax refund claim was premature. The Supreme Court denies the motions, finding no actual administrative practice and that an informal practice is not enough to trigger the doctrine of operative fact, which allows reliance on invalidated laws until a court rules otherwise. The Court also reiterates that the doctrine only applies when taxpayers rely on actual rules or rulings, not informal practices.

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61 views2 pages

Case Title:Commissioner of Internal Revenue V. San Roque Power G.R. No.:187487 Date: 08 October 2013 Ponente:Carpio, J. Facts

This case involves motions for reconsideration filed by San Roque Power Corporation and the Commissioner of Internal Revenue regarding tax refund claims. San Roque argues that the Supreme Court's prior ruling on mandatory filing periods should only apply prospectively due to an alleged administrative practice by the Bureau of Internal Revenue. The Commissioner asserts a tax refund claim was premature. The Supreme Court denies the motions, finding no actual administrative practice and that an informal practice is not enough to trigger the doctrine of operative fact, which allows reliance on invalidated laws until a court rules otherwise. The Court also reiterates that the doctrine only applies when taxpayers rely on actual rules or rulings, not informal practices.

Uploaded by

Ezekiel Aviso
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Case Title:COMMISSIONER OF INTERNAL REVENUE v.

SAN ROQUE POWER


CORPORATION
G.R. No.:187487
Date: 08 October 2013
Ponente:Carpio, J.

Facts:

The Supreme Court seeks to resolve the Motion for Reconsideration and the
Supplemental Motion for Reconsideration filed by San Roque Power Corporation (San Roque) in
G.R. No. 187485, the Comment to the Motion for Reconsideration filed by the Commissioner of
Internal Revenue (CIR) in G.R. No. 187485, the Motion for Reconsideration filed by the CIR in
G.R.No. 196113, and the Comment to the Motion for Reconsideration filed by Taganito Mining
Corporation (Taganito) in G.R. No. 196113.

San Roque prays that the rule established in the 12 February 2013 Decision of the
Supreme Court be given only a prospective effect, arguing that "the manner by which the Bureau
of Internal Revenue (BIR) and the Court of Tax Appeals(CTA) actually treated the 120 + 30 day
periods constitutes an operative fact the effects and consequences of which cannot be erased or
undone."

The CIR, on the other hand, asserts that Taganito Mining Corporation's (Taganito)
judicial claim for tax credit or refund was prematurely filed before the CTA and should be
disallowed because BIR Ruling No. DA-489-03 was issued by a Deputy Commissioner, not by
the Commissioner of Internal Revenue.

Issue:

Whether the doctrine of operative fact applies in this case

Ruling:

NO. The general rule is that a void law or administrative act cannot be the source of legal
rights or duties. Article 7 of the Civil Code enunciates this general rule, as well as its exception:
"Laws are repealed only by subsequent ones, and their violation or non-observance shall not be
excused by disuse, or custom or practice to the contrary. When the courts declared a law to be
inconsistent with the Constitution, the former shall be void and the latter shall govern.
Administrative or executive acts, orders and regulations shall be valid only when they are not
contrary to the laws or the Constitution."

The doctrine of operative fact is an exception to the general rule, such that a judicial
declaration of invalidity may not necessarily obliterate all the effects and consequences of a void
act prior to such declaration.
Clearly, for the operative fact doctrine to apply, there must be a "legislative or executive
measure," meaning a law or executive issuance, that is invalidated by the court. From the
passage of such law or promulgation of such executive issuance until its invalidation by the
court, the effects of the law or executive issuance, when relied upon by the public in good faith,
may have to be recognized as valid. In the present case, however, there is no such law or
executive issuance that has been invalidated by the Court except BIR Ruling No. DA-489-03.

To justify the application of the doctrine of operative fact as an exemption, San Roque
asserts that "the BIR and the CTA in actual practice did not observe and did not require refund
seekers to comply with the120+30 day periods."This is glaring error because an administrative
practice is neither a law nor an executive issuance. Moreover, in the present case, there is even
no such administrative practice by the BIR as claimed by San Roque.

Before the issuance of BIR Ruling No. DA-489-03 on 10 December 2003, there was no
administrative practice by the BIR that supported simultaneous filing of claims. Prior to BIR
Ruling No. DA-489-03, the BIR considered the 120+30 day periods mandatory and
jurisdictional.

San Roque’s argument must, therefore, fail. The doctrine of operative fact is an argument for
the application of equity and fair play. In the present case, we applied the doctrine of operative
fact when we recognized simultaneous filing during the period between 10 December 2003,
when BIR Ruling No. DA-489-03 was issued, and 6 October 2010, when this Court promulgated
Aichi declaring the 120+30 day periods mandatory and jurisdictional, thus reversing BIR Ruling
No. DA-489-03.

Under Section 246 of the Tax Code, taxpayers may rely upon a rule or ruling issued by
the Commissioner from the time the rule or ruling is issued up to its reversal by the
Commissioner or this Court. The reversal is not given retroactive effect. This, in essence, is the
doctrine of operative fact. There must, however, be a rule or ruling issued by the Commissioner
that is relied upon by the taxpayer in good faith. A mere administrative practice, not formalized
into a rule or ruling, will not suffice because such a mere administrative practice may not be
uniformly and consistently applied. An administrative practice, if not formalized as a rule or
ruling, will not be known to the general public and can be availed of only by those within formal
contacts with the government agency.

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